The problem is one of Xbox 360 design, not something caused during assembly, according to Microsoft.

Microsoft has offered to repair or replace problematic Xbox 360 consoles, extend Xbox 360 warranties from one to three years and has offered to reimburse those who bore the cost of fixing the consoles.

Microsoft said the design flaw had been corrected so that future Xbox 360 consoles should be free of the problem.

The expected expense of the program will be represented by a charge of 1.05 to 1.15 billion dollars in the company's financial quarter ending June 30, 2007.